FTSE weaker led by banks on global economic woes

* FTSE down 0.6 percent

* Banks weak on global economic woes

* Sainsbury knocked by Deutsche Bank downgrade

* Selected miners rally on slightly easier dollar

By Jon Hopkins

LONDON, Sept 5 (Reuters) - Britain's leading share index fell 0.6 percent in opening trade, led lower by further weakness in banks on global economic woes and ahead of Friday's U.S. jobs report.

At 0808 GMT, the FTSE 100 index .FTSE was 35.0 points lower at 5,327.1, falling less sharply than in Thursday's 137.6 point slide.

"The modest opening decline is a bit of a surprise," said Ben Timms, senior trader at Blue Index, "Miners have popped it back a little bit after being sold off aggressively recently helped by a slightly easier dollar."

The dollar index .DXY was down a quarter of a percent at 78.75, having traded at a year high of 78.971 earlier.

But with little additional news to drive the market, Timms said, stocks were expected to just drift lower before U.S. non-farm payrolls due at 1230 GMT.

Across the Atlantic, Wall Street suffered its steepest decline in more than two months on Thursday as signs of weakness in the labour market fuelled economic fears, while Japan's Nikkei .N225 fell almost 3 percent on Friday.

UK banks suffered for again after lodging big falls on Thursday after gloomy comments from European Central bank president Jean-Claude Trichet and dull U.S. weekly jobless claims numbers which illustrated the parlous state of the global economy.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) was the top FTSE 100 faller, down 3.2 percent, while Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) fell 3.1 percent, Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) lost 2.5 percent and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) shed 1.8 percent.

Insurers also fell back as financials took the brunt of the concerns over the economic outlook.

Friends Provident (FP.L: Quote, Profile, Research, Stock Buzz) dropped 3.2 percent, albeit having been boosted on Thursday by buy-out speculation, while Standard Life, Aviva, and Admiral Group shed between 2 and 3 percent.

London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) shares lost 1.5 percent on news rivals grabbed an unusually large share of trading in the LSE's own stock on Thursday, highlighting the growing threat to its trading dominance. [ID:nL4423782]

Away from financials, J. Sainsbury (SBRY.L: Quote, Profile, Research, Stock Buzz) was the biggest blue-chip faller, dropping 3.2 percent after Deutsche Bank downgraded its rating to "sell" from "hold".

The broker said, "We believe that the business will be increasingly competitively hampered by a lack of ability to aggressively cut costs without impacting the customer proposition".

Citigroup also made cautious comments on the food retailer's first-half performance and the prospects for it meeting full-year guidance in a sector review Friday.

But on the upside after broker comment, Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz) was the top FTSE 100 riser, up 1.6 percent after UBS hiked its stance to "neutral" from "sell" following Thursday's news of the appointment of a new chief executive at the Anglo-Dutch food and household products group.

BARGAIN-HUNTING BOOSTS SOME COMMODITY ISSUES

Oil majors rallied on bargain-hunting after recent falls, ignoring an easier trend for crude prices, off around $1 to about $106 a barrel CLc1, with BG Group (BG.L: Quote, Profile, Research, Stock Buzz), BP (BP.L: Quote, Profile, Research, Stock Buzz), and Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) all up around 1 percent.

Similarly, some heavyweight mining issues saw selective gains with Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) up 0.7 percent, and Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz) ahead 0.6 percent.

Other miners remained weak however, with Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) down 0.2 percent. The Anglo-Swiss mining group is to boost its stake in Australian-listed prospector Indophil Resources to just below 20 percent.

Global economic growth worries remained an underlying concern across the commodity sectors before the U.S. payrolls data.

"Analysts are expecting a loss of 75,000 jobs. After studying the economic reports we believe that number is too optimistic," said David Evans, market analyst at BetOnMarkets.

"If the employment data comes out soft, watch for the FTSE and all the other major stock exchanges to finish the day deep in the red." (Editing by Quentin Bryar)